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Arithmetic Average Reset Option


A reset option whose strike price can reset at fixed dates depending on the arithmetic average value of the underlying, rather than its absolute value. This feature has the effect of substantially reducing the chance that the option’s delta can jump on the reset date.

Basing the strike price on the arithmetic average of the underlying price will render the option’s payoff less susceptible to manipulation of the price at expiration.



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Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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